Skip the Speculation: What Would a Fiduciary Do?

W-2s are out, marking the heart of the IRA season, when more business is traditionally done than at any other time of year. And where does this occasion find many financial advisors (FAs)? They could be speculating endlessly about what the imminent Department of Labor (DOL) fiduciary rule may mean for IRAs. (Please see my earlier blog post, IRA opportunity knocks, despite DOL fiduciary rule). Truth be told, though, nobody knows or will know until the final version of the rule is released, likely in mid-March. In the interim, however, IRA opportunity is knocking loudly.

Put on your fiduciary hat

Here’s a simple way to respond to that knock: Instead of hypothesizing what will happen, simply assume you have become a fiduciary to all your IRA clients as of today. Ask yourself: WWAFD? That’s shorthand for “what would a fiduciary do?”

To answer that question, I recommend doing these five tasks to maintain a fiduciary standard of care for IRA clients.

  1. Encourage IRA contributions. For 2015 and 2016, the IRA contribution limit is $5,500 for all of a client’s traditional and Roth IRAs, or $6,500 for clients age 50 or older.
  2. Review asset allocations. Another year closer to each client’s time horizon, tumultuous times in the markets, and family or financial changes for clients may call for rebalancing IRA allocations.
  3. Review beneficiaries. Spare your clients an “ex-spouse takes all” unhappy ending by helping them ensure that their assets end up with the right heirs.
  4. Check for multiple IRAs. As a fiduciary, you’re required to coordinate IRA fees, and that means knowing about all IRAs a client has.
  5. Talk about the benefits of a Roth IRA. It is, after all, tax season, and a discussion about Roth IRAs is essentially a discussion about taxes. Want to know more about Roths? Listen to a replay of Invesco’s new continuing education webinar for FAs: “Roth IRA: The ins and outs.

Sixty-eight days until April 15. Skip the speculation and stay focused, my friends.

My colleague Jon Vogler updates the fiduciary rule saga in this blog post: DOL rule: OMB reviews, Congress resists.

Important information

The information provided is for educational purposes only and does not constitute a recommendation of the suitability of any investment strategy for a particular investor. Invesco does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. Federal and state tax laws are complex and constantly changing. Investors should always consult their own legal or tax professional for information concerning their individual situation. The opinions expressed are those of the authors, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.

All data provided by Invesco unless otherwise noted.

Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail products and collective trust funds. Invesco Advisers, Inc. and other affiliated investment advisers mentioned provide investment advisory services and do not sell securities. Invesco Unit Investment Trusts are distributed by the sponsor, Invesco Capital Markets, Inc., and broker-dealers, including Invesco Distributors, Inc. PowerShares® is a registered trademark of Invesco PowerShares Capital Management LLC (Invesco PowerShares). Each entity is an indirect, wholly owned subsidiary of Invesco Ltd.

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